Business services group Rentokil Initial has blamed its internal pensions administration for failures involving the Initial Hospital Service Limited No.1 Pension Scheme, which led to a £25,000 fine from the Pensions Regulator.
On Wednesday, the regulator announced Rentokil Initial Pension Trustee Limited had been fined for failing to complete the 2012 and 2015 valuations of the scheme by their respective deadlines of July 2013 and July 2016.
In a statement, a Rentokil spokesperson said: “The trustee is very aware of its regulatory obligations and is very concerned that it had not ensured that the formal valuations had been filed in a timely manner.”
Valuation deadlines are sometimes missed, but there need to be very good reasons for that
Rhidian Williams, Quantum
“This was because the administrator of the scheme had not finalised the scheme accounts, which are needed to finalise the formal valuations, and had not made the trustee fully aware of this position.”
The regulator had earlier stated that it “was informed the reason for the delay in completing both Initial Hospital Service valuations was a planned merger with a separate scheme run by [the] sponsoring employer”.
The Rentokil spokesperson said both accounts were correct: “The intention is to merge the IHS scheme by July 31 2018 into the Rentokil Initial 2015 Pension Scheme... we couldn't complete the merger until the valuations were finalised”.
Engage properly with the regulator
The regulator also issued an Improvement Notice to the trustee and a Third Party Notice to the sponsor in April, which required both outstanding valuations to be submitted by the close of May. The valuations have now been received.
The sponsor’s spokesperson said: “The trustee has now put in place procedures and reporting requirements to ensure that this situation does not recur.”
Richard Butcher, managing director at trustee company PTL, acknowledged that the regulator had given the scheme ample time to meet its deadlines for submitted valuations.
“The regulator is trying to engage with them to sort this one out, and they have failed to properly engage with the regulator,” he said.
The regulator’s determinations notice reads: “The [determinations] panel noted that a number of emails from the regulator sent to [the scheme contact] went unanswered by the reasonable deadlines included in the correspondence.”
Butcher said he viewed the fine in line with the regulator’s new “clearer, quicker, tougher” approach with schemes.
“I think that is sending a strong message to trustees: look, you can’t just ignore the regulator,” he said.
Need a better reason for missing deadline
The regulator told the trustee its proposed merger was not an acceptable reason for failing to meet its legal obligations.
With the merger incomplete and the valuations not submitted at the close of 2017, the regulator’s determinations panel ruled that the trustee should be fined £25,000 under section 10 of the Pensions Act 1995 for failing to take all reasonable steps to complete its valuations.
It described a “flagrant disregard by the trustee of its obligation and the role of the regulator, putting members at risk”. The circa £4.5m scheme has 135 members.
Rhidian Williams, partner at Quantum Advisory, observed that signed accounts are a requirement for the valuation processes. He emphasised that the scheme’s advisers have a duty to ensure this process passes smoothly.
“Valuation deadlines are sometimes missed, but there need to be very good reasons for that,” he said, adding that “the trustees need to be sure that they’ve done everything they reasonably can to meet the deadline”.
Is this clearer, quicker, tougher?
The fine is the latest in a series of punitive measures taken by the regulator as it looks to crack down on poor processes.
In June, Smart Pension's trustee was fined £15,000 for failing to report unpaid pension contributions to members and the watchdog.
Williams, however, challenged the idea that Rentokil’s fine forms part of this narrative. “I don’t think this is necessarily evidence of that because actually this is perhaps quite niche,” he said.
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The regulator’s issuance of an Improvement Notice to the trustee and a Third Party Notice to the sponsor is a comparatively rare use of an existing power.
According to the watchdog, it issued 11 Improvement and/or Third Party Notices between April 1 2014 and March 31 2018.
Stephen Rowntree, industry liaison manager at the regulator, said the Rentokil case was not being replicated on a wider scale “that I’m aware of”.
